Striking post-possession clause? (contingency, incentive, agent, banks)

[jaguar84]

Hi! We're buying a home in Denver, and the seller is a relocation company. The seller wants to strike the penalty for not delivering possession of the property on closing day and waiving the daily $$ penalty.

Our buyer's agent said this is normal, and we should sign, but I feel this leaves us with no recourse if the sellers decides to hang around in the property.

Is this normal?

Thanks!

[manderly6]

You may be out of luck since you are dealing with a relo company. That may just be their policy and won't change it. The best you can do is say no and see what happens.

[MrRational]

Originally Posted by jaguar84

We're buying a home in Denver, and the seller is a relocation company.
The seller wants to strike the penalty for not delivering possession of the property
on closing day and waiving the daily $$ penalty.

Is the property currently occupied by the owner?
What are the circumstances that might prevent the seller being able to leave on time?

A lease back is bad enough...
but allowing continued possession for an undetermined time without compensation is nuts.

[Rakin]

Sellers don't normally hang around after closing and funding of the loan.

Our contracts do not have a clause about possession after the closing. It is your house at funding and just let it be known you want possession at that time.

Personally IMO, scratching that clause is very low risk.

[jackmichigan]

I don't understand why a Seller would object to such a penalty clause if they were planning to release the house to you at closing. The big question is the house now occupied or vacant?

EDIT: Perhaps the clause wouldn't be as important if you had the right to inspect the house just before closing and confirm that it was unoccupied and still in satisfactory condition. If it's still occupied, you just don't close. Otherwise, you need the penalty clause.

[chet everett]

The reason the relo companies don't like this clause is that is screws-up their "forward looking compensation system" -- they are setup to literally close the file at funding, not have a bucket of funds for contingency...

If their is a regular relo situation with a family that already has a new job in a new city there is little risk in scratching this clause and simplifying their accounting. OTOH if this is some kind of relo company that has a divorce or other non-traditional household dissolution in progress then you need someway to verify that the place will be vacated for your possession. Simple enough to have that spelled out in a one sentence replacement clause, your attorney can craft something like "Contract will be null and void should residence be other than vacant at the time of closing, all buyer funds held in escrow shall be returned to buyer."

[davebarnes]

The unwritten rule in Colorado is that the sellers have a few days to vacate the house.

When I moved here in 1980 from MA, I thought that was nuts. But, it seems to work OK.
Some people leave immediately and some don't.
I am sure there some horror stories, but I have never heard any.
When we sold our house in July 2011, we took 3 days. We moved our stuff the day after the closing. We then did more cleaning. The buyer had keys and we left ours in the house.

[Rakin]

Originally Posted by davebarnes

The unwritten rule in Colorado is that the sellers have a few days to vacate the house.

This would be highly unusual without a short term lease back and agreement.

Pretty broad statement for an entire state.

[2bindenver]

Well, it's my policy not to comment on issues buyer's & seller's have in specific transactions in Colorado, because I do not want to been seen as interfering with someone else's deal.

It used to be typical to give sellers 1-3 days after closing to move & clean. Not anymore. We have a post occupancy agreement now.

When I started in 1989 it was typical to give sellers the rest of the month possession in Pueblo. Mostly due to Sellers paying on their FHA loan until the end of the month.

In a relo deal - the buyer is at the mercy of whatever the relo company wants or does not want.

It is not "typical" for the seller in a relo deal to retain possession when their job has forced a relocation.

And, I do have lots of stories about Sellers retaining possession after closing for various reasons. A widow couldn't bear to leave the family home. The seller's movers failed to show up. The title company folded before the seller's loan was paid off and proceeds never wired. When I sold my house there was no penalty for retaining possession, as written in the contract by the buyer's agent. I stayed a week.

[TarkaK9]

Originally Posted by jaguar84

...but I feel this leaves us with no recourse if the sellers decides to hang around in the property.

yes, it would leave little automatic penalty and recourse striking out such provision; especially if you have your movers sitting etc. The recourse then would be going through the eviction route via the courts etc and for damages and enforcing one's right to sue for specific performance.

Many relo companies want to strike clauses regarding penalty for delay of posession, so on that front, it is 'normal' but I wouldn't want to chance it w/o somesort of protection and compensation for seller default.

You may have to have a chat with your agent to see if there is an alternative they would agree to; but like banks, Relos try to dictate terms and they'll sorta say 'do you want the house?'.
I once had a deal in similar situation where upon acceptance, an escrow was created to hold X dollars of the proceeds and if seller wasn't out by such date, big ding against the escrow funds, then if again, not out by 2 weeks later, another ding against the funds due to the seller and so forth, ie monetary incentive to get out when you say you will be. Fortunately nothing went array and the seller got their full escrowed funds.